The BIG FESTIVE SEASON of the year is here and so are the mega shopping deals and offers. After all, with everyone all geared up to eat, shop and make merry during these month-long celebrations, why should retailers remain far behind? No wonder, e-commerce giants like Flipkart and Amazon have also jumped on the bandwagon to cash in on the festive fervour. For instance, while Flipkart has come out with its Big Billion Days sale (from 10th to 14th October), Amazon Great Indian Festival sale is being held from the 10th October to 15th October.
What is interesting is the fact that such festive sales are a big opportunity not only for retailers, but also for shoppers as many-a-times they are able to get mega deals and discounts even on big brands and big-ticket items which are usually not available in the market. Sometimes some deals seem to be so exciting that some people even don’t mind going for personal loans or avail credit on credit cards to buy those things. However, the question arises: Should you take a loan to splurge?
Financial experts say that a personal loan is a good option in case of a pre-planned large purchase, since it comes at better terms in most cases. However, for impulse purchases or sudden credit needs to bridge a gap, it may not be the best option.
“Personal loans can allow consumers meet their spending needs during the festive season by borrowing against their future income. Some of the schemes such as No Cost EMIs, cashbacks and pre-approved loan offers on your credit or debit cards have made the process of availing a personal loan simpler. However, there is a need to exercise caution with these schemes to ensure that they do not entail any hidden or undue cost for the borrowers,” says Gaurav Gupta, Co-founder and CEO, MyLoanCare.in.
In fact, many of these schemes, especially ‘No Cost EMI Schemes’ require you to forego a large value discount in exchange of a loan. So, in essence, you may actually be paying a hidden charge on these loans, when they promise to be no cost loans. Further, most of these schemes are standard for all borrowers and easily available at the point of online purchase, due to which you may skip comparison and interest rate calculations and end up taking an ill-informed decision.
“These loans can be really expensive, especially for salaried borrowers working with reputed corporate who would be better off availing personal loans from banks at fairly low rates either directly, or through online loan marketplaces,” says Gupta.
Financial planners also say that these loans can lure a customer into over spending on their budget, which can be avoided by a careful spend and budget planning.
However, if you are anyway willing to take a personal loan, then you should know that a loan against a collateral offers a lower interest rate than an unsecured personal loan. “Loans against gold, mutual funds, PPF, fixed deposits and shares are some of the options that provide low interest rates. However, these may not be instant. There are also short-term loans through mobile apps, instant credit through wallets, and EMI financing at the time purchase, all of which are near instant, convenient and good for small amounts,” informs Ranjit Punja, Co-founder and CEO, CreditMantri.